July 28, 2021

By Koh Gui Qing and Tom Arnold

NEW YORK/LONDON (Reuters) – U.S. stocks edged higher on Wednesday and the dollar slipped into losses after the Federal Reserve said the economic recovery was on track, but offered no clues about when monetary policy will eventually be tightened.

The Fed said after its latest policy meeting that the economy has kept strengthening despite a rise in coronavirus infections, and that accelerating inflation remained the result of “transitory factors”.

In a news conference after the meeting, Fed Chairman Jerome Powell said it is not yet time to think about raising interest rates. He said the central bank was thinking about tapering asset purchases but has not set a timetable for when to do so.

“It was a relief that there was no talk of tapering quite yet,” said Ryan Detrick, a senior market strategist at LPL Financial in North Carolina. “Our view is the Fed will likely announce when tapering will start at Jackson Hole later in August.”

The Dow Jones Industrial Average fell 0.15%, the S&P 500 edged up 0.17%, and the tech-focused Nasdaq Composite rebounded 0.75% after hitting its lowest in more than two months on Tuesday.

Any sign the Fed may tighten policy soon could unnerve markets, since its loose policy has flushed the market with cash and pushed Wall Street to record highs. Also, some investors worry the fast-spreading Delta coronavirus variant may scupper economic growth, and hope the Fed will stand pat for now.

The dollar slipped into losses after the meeting. The U.S. currency had a month-long rally as investors bet a strengthening economy would spark a Fed move to taper to quell inflation pressures.

The dollar index fell 0.18%, and a weaker dollar boosted the euro up 0.22% to $1.184.

Treasury yields climbed after the Fed announcement. The yield on 10-year Treasury notes was up 2.9 basis points to 1.263%, and the yield on 10-year Treasury Inflation-Protected Securities climbed as high as -0.917%, before pulling back to -1.112%.

Investor risk appetite also got a boost from signs that China’s stock market might finally be steadying, after being hammered this week by concerns of a widening regulatory crackdown. [.SS]

Following two sessions of falls, the pan-European STOXX 600 index rose 0.66% and MSCI’s gauge of stocks across the globe gained 0.38%.

Chinese blue chips closed up 0.2% overnight, and Hong Kong’s benchmark jumped 1.5%, but remained near nine-month lows.

The Chinese yuan also edged back from three-month lows. On Tuesday, it had its biggest daily decline since October. The offshore Chinese yuan strengthened versus the greenback at 6.4894 per dollar.

Oil prices rose after data showed U.S. crude inventories fell more sharply than analysts had forecast. [O/R]

U.S. crude recently rose 1% to $72.39 per barrel and Brent was at $74.74, up 0.35% on the day.

Gold held steady near $1,800. [GOL/]

Spot gold added 0.2% to $1,802.81 an ounce. U.S. gold futures gained 0.06% to $1,800.80 an ounce.

Cryptocurrency Bitcoin bounced back above $40,000, jumping 2.4% to $40,428.38.

(Reporting by Koh Gui Qing in New York, Tom Arnold in London and Alun John in Hong Kong; Additional reporting by Sujata Rao; Editing by Ana Nicolaci da Costa, Kim Coghill, Catherine Evans, Timothy Heritage, Barbara Lewis and David Gregorio)